Major hedge fund manager criticizes Dodd-Frank

A prominent hedge fund manager on Thursday blasted the Dodd-Frank Act and said the law puts unattainable obligations on financial regulators.

Paul Singer, the founder and chief executive of Elliott Management Corp., a hedge fund based in New York, accused Dodd-Frank lawmakers of enshrining banks as “too big to fail,” MarketWatch reports.

Singer pointed out a measure in the law that allows financial regulators to throw out top executives of large banks that are on the brink of failure.

Under the new law, the FDIC has the power to remove management and people they believe are responsible for the bank’s failure so that regulators are able to step in and employ a new special system known as a resolution.

“Can you try to imagine the FDIC throwing out the entire management of the firm and having [former FDIC chief] Sheila Bair’s successor and others at the FDIC running these complex institutions?” Singer said, according to MarketWatch.

Peter Wallison, a fellow at the American Enterprise Institute, and Singer both criticized another rule in Dodd-Frank that instructs regulators to designate certain non-bank institutions as systemically important to the financial system, subjecting them to increasing capital levels, lower leverage limits and more liquidity.

Wallison said these new systematically important non-bank institutions will be perceived as too big to fail and will put their smaller rivals at a major disadvantage.